Even though I love credit cards because of their many benefits, I understand they are not for everyone.
My sister struggles with credit cards, and now mainly just uses cash so that she doesn’t get into credit card debt. Luckily, this has not led to credit card debt for her but I believe that is because she caught her mistakes early on.
However, others are not as lucky.
Others rack up large amounts of credit card debt. According to NerdWallet, the average household in the United States (who has debt) has an average credit card debt of $15,611. That is an increase of 2.26% from the amount of average credit card debt in a household in the same period in 2013.
Also, according to National Foundation for Credit Counseling, around 35 million people in the U.S. roll over $2,500 or more in credit card debt each month. That means these people are NOT paying their debt off each month in order to avoid interest. Instead, they are racking up credit card debt and interest charges.
There are many credit card mistakes that people may be making, which then leads to them incurring debt.
Below are different credit card mistakes that can lead to credit card debt. Read below so that you can learn about the possible mistakes you may be making.
1. Ignoring the terms of a credit card is a credit card mistake.
Before you sign up for a credit card, you should understand all of the common terms. Sadly, many people do not fully understand credit card terms and that’s a leading cause for why people fall into credit card debt.
You should do your research and understand:
- What an interest rate is;
- What a minimum payment is;
- What happens when you only pay the minimum payment;
- How your credit card use impacts your credit score;
- If you have a 0% interest rate, how you might actually lose the 0% and have to pay the “real” interest rate;
- And more!
2. Buying items when you don’t have the cash to afford it.
Too many people treat credit cards like free money, which it is not. You should always make sure that you have the money in cash or in your personal bank account to afford something.
That jacket, dress, video game, and so on are just not worth the debt that it may accrue. A simple $50 dress may balloon into hundreds of dollars of credit card debt because of interest fees.
3. Forgetting to pay your credit card bill.
Another credit card mistake is forgetting to pay your credit card bill. Even if you have the money to pay your credit card balance in full each month, it does no good if you never actually remember to pay your bill each month.
Paying your credit card bill late can lead to many problems. It may lead you to having to pay a late payment fee, and it also might show up on your credit report and impact your credit score.
4. Paying only the minimum payment each month is one of the common credit card mistakes.
This is another credit card mistake that many people make each month. Some make this mistake because they don’t have the funds to pay their full credit card balance each month.
Others only pay the minimum because they believe that’s all they need to pay in order to avoid interest charges. YES! Many people actually think this, and this is why #1 in this post is so important. Everyone needs to fully understand what “minimum payment” means and what happens if that is all that you pay.
You should always try to pay more than the minimum. If you do not, you will have to pay interest charges which may inflate your credit card debt significantly each month.
PAYING ONLY THE MINIMUM IS NOT ENOUGH PEOPLE!
5. Spending money you normally wouldn’t spend in order to rack up credit card rewards points.
Credit card reward points are great, but if you spend money that you do not have just so that you can earn “free” vacations, gifts, and more, nothing is actually free.
Some will spend more money than they have so they can reach the minimum spending in order to earn rewards points.
This then can spiral out of control if you do not keep track of how much money you are spending.
Do you have credit card debt? Have you ever been guilty of making any of these credit card mistakes?
If you do not know your credit score or are interested in learning more, please check out my article How Your Credit Score Affects Your Life + Credit Sesame Review. In it, I also include a link to Credit Sesame so that you can check your credit score safely for free.
Petrish @ Debt Free Martini says
I will never allow my credit card debt to get out of control again. Paying the minimum is a plot to keep customers happy and the lenders double happy. Yes this subject has been discussed so much, but I now realize that having credit card debt is apart of the American culture. People have accepted that credit card debt is normal to have, which now that I am fully awake……just nuts!!
Michelle S. says
Yes, it is nuts!
Mrs. Frugalwoods says
I’m a big fan of using credit cards judiciously and paying off the balance in full every month. I really like #2–credit cards should only be used on purchases you can 100% back up with cash. It’s definitely not free money!
Michelle S. says
Nope, not free money at all!
Thomas @ i need money ASAP! says
Wow. Those stats actually surprise me. I had no idea the average debt load was $15,000 just for credit card debt. The other credit card mistake I’ve partially fallen victim to is to sign up for every credit card you’re offered. (The ones where you get 10-20% off your purchase got me) This lowers your credit rating and can cost you more in interest charges.
Michelle S. says
Yes, so many people sign up for those types of credit cards!
Holly@ClubThrifty says
We are pretty boring with our use of credit cards. We mainly use them for groceries and gas and we always pay them off in-full at least once per month. We weren’t always this responsible, but we have been debt-free for a pretty long time now.
Michelle S. says
Good job! And you get great rewards from them!
Amy says
Ugh, this is one area (credit card balance), where I’m very unhappy to be above average. 🙁
I’ve definitely been suckered by #5…
Michelle S. says
I’m sorry Amy 🙁 Are you still adding to your debt or are you trying to lower it now?
Amy says
We’re not really adding to the balances, but those pesky interest charges make it harder to get ahead of it. But we’re making progress…
Michelle S. says
That really stinks. I hope you get ahead soon!
Kathy says
We pay our credit cards in full every month, however, I admit that a couple of times I’ve decided to make a purchase with credit to get the reward. I could have paid cash but I think I’m getting a little bit of a deal with the reward. And even with my discipline and knowledge about credit, I also find it easy to buy something with the credit card and when the cost is buried in the total bill, it often doesn’t have the same impact than if I had paid cash. I have to exercise that discipline to resist.
Michelle S. says
I know what you mean. I sometimes feel the same way (that I’m getting a deal with the reward), and that is a problem.
Travis @Debtchronicles says
Imagine if you combine #2,#3 and #4. You rack up debt buying things you cannot afford, then you forget to pay your credit card bill which results in your interest rate skyrocketing, and then you only pay the minimum. I know that scenario all too well!
Michelle S. says
Yup, that is a bad scenario!
Natalie @ Financegirl says
This is so helpful for people who use credit cards. I find not having that temptation at all (I’ve never had a credit card), is the best way to go. But for everyone else, hopefully these tips push them to stay on track. Credit debt is no way to live!
Michelle S. says
Thanks Natalie!
Deb @ Saving the Crumbs says
I grew up not realizing that you didn’t have to pay off a credit card each month! So it’s not even an option for us to just pay the minimum. We feel like we would be foolish not to take advantage of credit cards and the money back we get from it (not to mention that our money stays with us a bit longer earning more interest).
Michelle S. says
Yes, there are many benefits of credit cards and I am happy that I have never gone into debt because of them.
Allison says
We only use debit cards and cash. We have not had cc’s in years. For us, it was a big step to get out of debt and stop using them. Plus, cc companies are pretty predatory, and we don’t want to expose ourselves to those kinds of companies.
Michelle S. says
Good job Allison!
Chonce says
Understanding how credit cards impact your credit score is extremely important and those terms and conditions can be a bit tricky. When I first started using credit cards, I was so scared of interest that I always paid my balance off in full each month. Now I realize that’s a great habit to have and the best way to prevent going into credit card debt.
Michelle S. says
Yes, that is a GREAT habit to have. Good job.
kammi says
Debit cards and cash only. The rest go into CDs, investment accounts, etc. I’m the one who goes through my accounts (which are several at this point) with a fine tooth comb. No debt (or fees) for me.
Michelle S. says
Good job Kammi!
Michelle S. says
For many people, credit cards are just not for them. Nothing wrong with that 🙂
Kim says
Using credit to pay for things you don’t have money for is how we got in so much debt trouble. Credit cards are not bad if you use them the right way. I wish I’d learned that lesson sooner than I did.
Michelle S. says
Good thing you know now 🙂
cece says
Wow. 15k is the average? That is crazy. I have never made any of these mistakes and I only have credit card balance that I’m paying off next month and one other balance that is interest free that I used for a larger purchase. I use credit cards for points but I pay it off. It’s just not worth it otherwise.
Michelle S. says
Nope, it’s just not worth it.
DC @ Young Adult Money says
#5 is an important one, and goes hand-in-hand with my post today. People need to ignore rewards if it ends up costing them
Michelle S. says
Yep! Credit card debt is not worth it.
Jason B says
Unfortunately I do have credit card debt. I’ve learned my lesson though. Most of it will be gone by the end of next year.
Michelle S. says
Glad you have a plan 🙂
Jayson @ Monster Piggy Bank says
I have one, that’s it. I would never get another one. And I believe in my understanding that I am aware of its terms and conditions as well as the benefits and disadvantages. Thanks for the info. I am now more informed. yay!
Michelle S. says
Yay Jayson!
Jayleen says
We are guilty of #2, however, we are nowhere near the $15,000 mark. I’m excited to sit down and pay bills the first of the month to see what we can pay down!
Michelle S. says
Great thing to be excited about 🙂
EL @ Moneywatch101 says
These are all valid tips to help people avoid mistakes. I’m happy to report that I am currently free of these issues, but in the past I made a few mistakes. Like racking up points for free junk. The ratio between what you get for free and the cost of the points is not worth it, in my opinion.
Michelle S. says
I agree, unless you do it correctly, of course.
Steve Adcock says
These are pretty harmful mistakes, though I would postulate that very few of us actually “forget” to pay our credit card bills on time. The problem is paying our debts simply aren’t important enough to some of us and we simply let them slip, willingly. We might say to ourselves that we forgot, but the truth of the matter is we valued spending more on crap that we do not need.
Auto-payments is the key to making sure that your CC bills get paid on time if you cannot manage to manually do this task every month. I auto pay everything that I can and have never missed a monthly CC payment – ever. Works great!
Portia says
We were skeptical of using credit cards, but just recently we opened a new one with awesome travel benefits. Since we are getting ready to do some traveling this fall and had some major car repair expenses we knew we needed to take care of anyways, we opened the credit card and now have earned enough for a round trip flight. Wahoo!